Rising Drug Prices Strain Hospital Budgets

Published on Wednesday, January 23rd, 2019

Rising costs of prescription drugs have strained hospital budgets and operations, forcing health systems to cut costs by reducing staff, according to a new study. Hospital drug spending increased by 18.5 percent between 2015 and 2017, a rate far exceeding medical inflation for the period, according to a report prepared for three health associations by the research group NORC at the University of Chicago. US community hospitals spent an average of $555.40 on prescription drugs for each admitted patient in 2017.

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“This report confirms that we are in the midst of a prescription drug spending crisis that threatens patient access to care and hospitals’ and health systems’ ability to provide the highest quality of care,” said Rick Pollack, CEO of the American Hospital Association (AHA), which commissioned the report along with the Federation of American Hospitals (FAH) and the American Society of Health-System Pharmacists. “Solutions must be worked on to rein in out-of-control drug prices and ease the drug shortages that are putting a strain on patient care.”

The report updates and expands on a previous AHA/FAH report from 2016 on skyrocketing inpatient hospital drug cost increases by also analyzing outpatient drug costs and the impact of drug shortages. The report found that hospital budget pressures resulting from the continued dramatic increases in drug prices have negative impacts on patient care, with hospitals being forced to delay infrastructure investments, reduce staffing and identify alternative therapies. Hospitals also struggle with drug shortages, which can disrupt typical work patterns and patient care and often require significant staff time to address.

Specifically, the report showed that:

Average total drug spending per hospital admission increased by 18.5 percent between 2015 and 2017.

Outpatient drug spending per admission increased by 28.7 percent while inpatient drug spending per admission increased by 9.6 percent between 2015 and 2017. This 9.6 percent increase was on top of the 38 percent increase in inpatient drug spending between 2013 and 2015 included in the previous report.

Very large percentage increases (over 80 percent) of unit price were seen across different classes of drugs, including those for anesthetics, parenteral solutions and chemotherapy.

More than 90 percent of surveyed hospitals reported having to identify alternative therapies to manage spending.

One in four hospitals had to cut staff to mitigate budget pressures.

Almost 80 percent of hospitals found it extremely challenging to obtain drugs experiencing shortages, while almost 80 percent also said that drug shortages resulted in increased spending on drugs to a moderate or large extent.